Opinion issued=20
January 17, 2008
In =
The
Court of=20
Appeals
For =
The
First =
District of=20
Texas
NO. =
01-06-00509-CV
PETER J. YEH,=20
Appellant
v.
DAVID J. MACDOUGALL, D.O., P.A. D/B/A=20
NEUROSURGICAL ASSOCIATION OF HOUSTON AND DAVID J. MACDOUGALL, =
D.O.,=20
Appellees
On Appeal from the 333rd District=20
Court
Harris County, =
Texas
Trial Court Cause No.=20
2003-65161
MEMORANDUM=20
OPINION
<=
/SPAN>In=20
this breach of contract lawsuit, appellant, Peter Yeh, appeals the =
final=20
judgment in favor of David MacDougall, D.O., P.A. d/b/a =
Neurosurgical=20
Association of Houston (=E2=80=9CNAH=E2=80=9D), rendered after a =
jury verdict. In five=20
issues, Yeh contends that (1) the evidence is legally and =
factually=20
insufficient to support the jury=E2=80=99s finding that NAH did =
not breach the=20
oral agreement to provide billing and collection services;=20
(2) contingent on our determination that the evidence is =
legally or=20
factually insufficient on the negative finding on the element of =
breach,=20
the trial court erred by failing to award Yeh damages for breach =
of=20
contract; and (3) Yeh was the prevailing party at trial and =
therefore=20
the attorney=E2=80=99s fees award in favor of NAH should be =
reversed. We conclude=20
that the evidence is legally and factually sufficient to support =
the=20
jury=E2=80=99s finding that NAH did not breach the billing and =
collection services=20
agreement and Yeh, therefore, is not entitled to any damages. We =
also=20
conclude that NAH was the prevailing party at trial and was =
entitled to=20
reasonable attorney=E2=80=99s fees for its successful breach of =
contract claim. We=20
affirm the judgment of the trial court.
Background
<=
/SPAN>Yeh=20
and MacDougall are both licensed neurosurgeons. MacDougall is the=20
principal of NAH. Yeh was an employee of NAH from July 1, 2000 to =
June 30,=20
2002. While Yeh worked for NAH, all profits generated by Yeh went =
to NAH=20
and the NAH staff provided all billing and collection services for =
Yeh.=20
Yeh and MacDougall took calls for each other in working together =
to=20
provide services to patients. Yeh also worked at hospital =
emergency rooms=20
and received referrals from another doctor in Houston.
<=
/SPAN>During=20
the time Yeh was employed by NAH, Yeh expressed an interest in =
starting=20
his own practice. In January 2002, Yeh and MacDougall verbally =
agreed that=20
beginning July 1, 2002, Yeh would no longer be an employee of NAH =
so that=20
Yeh could begin his own practice. Their oral agreement also =
included that=20
Yeh would pay one-half of the shared overhead expenses, and NAH =
would=20
continue to provide facilities, and billing and collection =
services, for=20
Yeh=E2=80=99s new practice. The shared overhead expenses included =
items such as=20
rent, telephone services, supplies, staff salaries, office =
equipment, and=20
workers=E2=80=99 compensation insurance. Excluded from the shared =
expense=20
agreement were the salaries of the individual physician assistants =
employed by each of the doctors, cell phones, and personal health =
and=20
malpractice insurance. Yeh told the NAH staff that he wanted the =
billing=20
practices to remain the same as when he was an NAH employee. =
<=
/SPAN>The=20
=E2=80=9Cshared expense period=E2=80=9D lasted from July 1, 2002 =
until March 1, 2003.=20
During this time, NAH staff continued working for Yeh and =
MacDougall using=20
the same practices as before. The only change in the practices by =
the=20
office after Yeh left employment with NAH was that the office was =
to use a=20
different provider designation for Yeh and his physician=E2=80=99s =
assistant.=20
Jeanne Williams, who worked for NAH doing billing and collection =
work,=20
stated that Yeh=E2=80=99s billing practices were often =
disorganized. Yeh would=20
provide Williams with notecards or slips of paper with a patient =
name and=20
record number, which required that Williams contact the hospital =
to have=20
the operative report faxed to her so that she would have the =
necessary=20
information to file the claim. MacDougall, on the other hand, gave =
Williams a =E2=80=9Cface sheet=E2=80=9D and a =E2=80=9Cpink =
sheet=E2=80=9D for every patient he saw. The=20
face sheet contained all demographic information on the patient =
and the=20
pink sheet was a detailed explanation of the services performed by =
MacDougall for the patient. At the beginning of the shared expense =
period,=20
Yeh established a new bank account to receive his payments, but =
did not=20
immediately apply for a provider number from Medicare and other =
insurance=20
companies. Yeh stated that, at the time, he was unaware that he =
had to do=20
so.
<=
/SPAN>In=20
February 2003, Yeh sent a letter to MacDougall indicating that he =
wished=20
to discontinue the shared expense agreement as of March 1, 2003. =
At the=20
end of the shared expense period, NAH had incurred $257,861.40 in =
shared=20
expenses and Yeh=E2=80=99s individual expenses. Yeh had paid =
$123,921.06 as of the=20
end of the shared expense period. NAH sent a demand letter to Yeh =
for the=20
remaining $133,940.34, but noted in the letter that Yeh was =
entitled to an=20
offset in the amount of approximately $59,000 for deposits that =
had=20
erroneously been placed in NAH=E2=80=99s account instead of =
Yeh=E2=80=99s during the=20
shared expense period. Yeh did not pay the amount requested by=20
NAH.
<=
/SPAN>After=20
Yeh did not pay the amount requested, NAH filed suit against Yeh =
for=20
breach of contract, promissory estoppel, and unjust enrichment and =
sought=20
$133,940.34 in damages, as well as pre- and post-judgment =
interest,=20
attorney=E2=80=99s fees, and costs. Yeh filed a counterclaim =
against NAH,=20
MacDougall individually, and Williams individually, alleging =
breach of=20
contract, negligence, negligent misrepresentation, fraud, and =
unjust=20
enrichment, and seeking exemplary damages, pre- and post-judgment=20
interest, attorney=E2=80=99s fees, and court costs.
<=
/SPAN>In=20
response to six questions, the jury found that =
(1) $113,627.51 =E2=80=9Cwould=20
fairly and reasonably compensate NAH for Yeh=E2=80=99s unpaid =
shared overhead=20
expenses=E2=80=9D; (2) $492,713.75 was a reasonable fee for =
NAH=E2=80=99s attorneys,=20
with additional fees for appeals taken; (3) $53,615.78 =
=E2=80=9Cwould fairly=20
and reasonably compensate Yeh for misdirected deposits=E2=80=9D;=20
(4) $427,546.38 was a reasonable fee for Yeh=E2=80=99s =
attorneys, with=20
additional fees for appeals taken; (5) NAH agreed to provide =
billing=20
and collection services to Yeh, but MacDougall did not personally =
make=20
such an agreement; and (6) NAH did not breach the billing and =
collection services agreement. ![3DFootnote](3D"")
The trial court=E2=80=99s final =
judgment awarded=20
$60,011.73 to MacDougall in principal, which was the amount due to =
NAH by=20
subtracting the offset amount from the amount not paid in =
overhead. The=20
judgment also awarded $10,401.97 in prejudgment interest, =
attorney=E2=80=99s fees=20
in the amount of $458,851 based on a voluntary remittitur by =
NAH=E2=80=99s=20
counsel, special master=E2=80=99s fees of $5,076.06, =
auditor=E2=80=99s fees of $12,907.26,=20
and postjudgment interest on the total judgment at a rate of =
7.25%. The=20
court also stated in its judgment that Yeh take =
nothing.
Sufficiency of the=20
Evidence
<=
/SPAN>In=20
his first and second issues, Yeh challenges the legal and factual=20
sufficiency of the evidence to support the jury=E2=80=99s finding =
that NAH did not=20
breach its oral agreement with him. The jury found the existence =
of a=20
contract, but found no breach by NAH.
A. Legal Sufficiency Standard of=20
Review
<=
/SPAN>=E2=80=9CThe=20
final test for legal sufficiency must always be whether the =
evidence at=20
trial would enable reasonable and fair-minded people to reach the =
verdict=20
under review.=E2=80=9D City of Keller v. Wilson, 168 S.W.3d =
802, 827 (Tex.=20
2005). =E2=80=9C[L]egal-sufficiency review in the proper light =
must credit=20
favorable evidence if reasonable jurors could, and disregard =
contrary=20
evidence unless reasonable jurors could not.=E2=80=9D Id. =
The evidence is=20
legally sufficient if it =E2=80=9Cwould enable reasonable and =
fair-minded people=20
to differ in their conclusions.=E2=80=9D See id. at 822. As =
long as the=20
evidence falls within the zone of reasonable disagreement, =
=E2=80=9C[a] reviewing=20
court cannot substitute its judgment for that of the =
trier-of-fact.=E2=80=9D=20
Id. Although the reviewing court =E2=80=9Cmust consider =
evidence in the=20
light most favorable to the verdict, and indulge every reasonable=20
inference that would support it[,] . . . if =
the=20
evidence allows for only one inference, neither jurors nor the =
reviewing=20
court may disregard it.=E2=80=9D Id. When a party attacks =
the legal=20
sufficiency of an adverse finding on an issue on which it has the =
burden=20
of proof, the party must demonstrate on appeal =E2=80=9Cthat the =
evidence=20
establishes, as a matter of law, all vital facts in support of the =
issue.=E2=80=9D=20
Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001).=20
B. Factual Sufficiency Standard of=20
Review
<=
/SPAN>In=20
determining factual sufficiency, this court weighs all the =
evidence, both=20
supporting and conflicting, and may set the finding aside only if =
it is so=20
contrary to the overwhelming weight of the evidence as to be =
clearly wrong=20
and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 =
(Tex.=20
1986); Comm=E2=80=99n of Contracts v. Arriba Ltd., 882 =
S.W.2d 576, 582=20
(Tex. App.=E2=80=94Houston [1st Dist.] 1994, no writ).
C. Breach of Contract Applicable=20
Law
<=
/SPAN>The=20
elements of breach of contract are (1) the existence of a =
valid=20
contract; (2) performance or tendered performance by the =
plaintiff;=20
(3) breach of the contract by the defendant; and =
(4) damages=20
sustained by the plaintiff as a result of the breach. Valero =
Mktg.=20
& Supply Co. v. Kalama Int=E2=80=99l, L.L.C., 51 S.W.3d =
345, 351 (Tex.=20
App.=E2=80=94Houston [1st Dist.] 2001, pet. denied). Whether a =
party has breached=20
a contract is a question of law for the court, not a question of =
fact for=20
the jury. Meek v. Bishop, Peterson & Sharp, P.C., 919 =
S.W.2d=20
805, 808 (Tex. App.=E2=80=94Houston [14th Dist.] 1996, writ =
denied). =E2=80=9CA breach=20
occurs when a party fails or refuses to do something he has =
promised to=20
do.=E2=80=9D Dorsett v. Cross, 106 S.W.3d 213, 217 (Tex. =
App.=E2=80=94Houston [1st=20
Dist.] 2003, no pet.); Townewest Homeowners Ass=E2=80=99n, Inc. =
v. Warner=20
Commc=E2=80=99n Inc., 826 S.W.2d 638, 640 (Tex. =
App.=E2=80=94Houston [14th Dist.]=20
1992, no writ).
<=
/SPAN>When=20
one party to a contract commits a material breach of that =
contract, the=20
other party is discharged or excused from any obligation to =
perform.=20
Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex. =
1994).=20
=E2=80=9CThe determination of whether a breach is a material =
breach of the=20
contract must necessarily turn on the facts of each case.=E2=80=9D =
Advance=20
Components, Inc. v. Goodstein, 608 S.W.2d 737, 739 (Tex. Civ.=20
App.=E2=80=94Dallas 1980, writ ref=E2=80=99d n.r.e.). In =
determining the materiality of a=20
breach, the factfinder may properly consider:
(i) the extent to which the =
nonbreaching=20
party will be deprived of the benefit that it could reasonably =
anticipate=20
from full performance; (ii) the extent to which the injured =
party can=20
be adequately compensated for the part of that benefit of which he =
will be=20
deprived; (iii) the extent to which the party failing to =
perform or=20
to offer to perform will suffer forfeiture; (iv) the =
likelihood that=20
the party failing to perform or to offer to perform will cure his =
failure,=20
taking account of all the circumstances including any reasonable=20
assurances; (v) the extent to which the behavior of the party =
failing=20
to perform or to offer to perform comports with standards of good =
faith=20
and fair dealing.
Hernandez, 875 S.W.2d at 693 =
& n.2. The=20
less the nonbreaching party is deprived of the expected benefit, =
the less=20
material the breach. Id. at 693.
D. Analysis
<=
/SPAN>Yeh=20
points to the same evidence to challenge the legal and factual =
sufficiency=20
of the evidence on the element of breach that was found against =
him by the=20
jury in its answer to question six, which asked if NAH failed to =
comply=20
with the billing and collection services agreement. Yeh asserts =
that=20
although he was paying half the overhead expenses, there was a =
disparity=20
in the collections for MacDougall and the collections for Yeh. Yeh =
contends the evidence establishes that =E2=80=9CNAH did not do =
that which it had=20
agreed to do=E2=80=94bill and collect for Dr. Yeh as it billed and =
collected for=20
Dr. MacDougall and as it had for Dr. Yeh when he was an employee =
of NAH.=E2=80=9D=20
Yeh contends his position is supported by conclusive evidence from =
Jeanne=20
Williams, NAH, the Medical Manager Program, and the voluminous =
patient=20
records maintained by NAH.
Yeh points to evidence that shows =
that=20
NAH=E2=80=99s conduct caused him to lose revenue because =
(1) NAH failed to=20
timely obtain payment on his claims to insurance companies; =
(2) NAH=20
failed to appeal all denied charges; (3) NAH wrote off =
account=20
balances without his knowledge or consent; (4) NAH failed to =
submit=20
his claims to the patient=E2=80=99s insurance carrier within five =
to seven days of=20
service; and (5) NAH failed to make a good faith effort to =
collect=20
co-payments or deductibles from his patients. Yeh further points =
to the=20
jury=E2=80=99s answer in question number three, which found that =
NAH misdirected=20
deposits in an amount of $53,000.
<=
/SPAN>The=20
record supports Yeh=E2=80=99s contention that there was a =
disparity in the=20
collections for MacDougall and the collections for Yeh. The record =
also=20
undisputedly shows that Yeh requested that NAH continue to provide =
the=20
same services to him that NAH had provided when he was a part of =
NAH. NAH=20
responds that the same services were provided to Yeh during the =
shared=20
expense period as when Yeh was employed by NAH, and that there was =
no=20
material deviation from those services. NAH contends that the =
reason for=20
the disparity in the collections is the type of work performed by =
each of=20
the doctors and the adequacy of the information tendered to the =
staff by=20
each of the doctors.
<=
/SPAN>Jeanne=20
Williams, who does NAH=E2=80=99s billing and collections work, =
testified that she=20
performed billing and collection services for Yeh during the =
shared=20
expense period, in accordance with his instructions that the NAH =
staff was=20
to continue the same procedures employed as when Yeh was a part of =
NAH.=20
She also testified that Yeh=E2=80=99s billing practices were much =
more=20
disorganized than those of MacDougall. Yeh=E2=80=99s practice of =
providing=20
patients=E2=80=99 names and record number on torn slips of paper =
or note cards=20
required that Williams spend additional time acquiring the =
operative=20
report to file his claims, but MacDougall=E2=80=99s practice of =
providing the=20
detailed face sheet and pink sheet with a description of his work =
with=20
appropriate billing codes facilitated Williams=E2=80=99s ability =
to quickly file=20
claims for MacDougall. Williams further stated that she spent more =
time=20
processing billing for Yeh than for MacDougall. MacDougall =
testified that=20
the disparity in collection amounts may have been due to the type =
of work=20
Yeh was doing. Yeh often did trauma work in emergency rooms and =
other=20
emergency surgeries, which can have a lower collection rate =
because of the=20
number of emergency room patients that do not have insurance or =
the=20
ability to pay. Furthermore, Yeh himself testified that he did not =
=E2=80=9Chave a=20
good handle on how things [were] running in the =
office.=E2=80=9D
<=
/SPAN>As=20
conclusive evidence of breach, Yeh points to the jury=E2=80=99s =
answer in question=20
number three, which found that NAH owed Yeh $53,615.78 for =
misdirected=20
deposits. NAH admitted that these misdirected deposits were owed =
to Yeh=20
prior to filing suit against Yeh. MacDougall testified that he =
spoke with=20
Yeh regarding these deposits, and the two had exchanged checks to =
resolve=20
the issues once before. MacDougall also testified that Yeh did not =
immediately obtain a tax identification number and =
Medicare/Medicaid=20
provider number for his solo practice, which resulted in the =
attribution=20
of some of Yeh=E2=80=99s work to MacDougall, who was, after =
Yeh=E2=80=99s departure, the=20
only NAH doctor. As the only doctor, all income received was =
placed in=20
MacDougall=E2=80=99s account. MacDougall stated that human error =
could have=20
contributed to the misdirected deposits, but that it occurred in =
favor of=20
Yeh as well.
<=
/SPAN>Viewing=20
the evidence in the light most favorable to the verdict, we =
conclude that=20
reasonable and fair-minded people could reach the conclusion that =
NAH did=20
not breach its agreement to provide billing and collection =
services=20
because NAH made reasonable efforts to bill and collect on behalf =
of Yeh,=20
and Yeh=E2=80=99s type of work and his billing practices resulted =
in the disparate=20
collection rates and misdirected deposits. We hold that the =
evidence was=20
legally sufficient to support the jury=E2=80=99s finding that NAH =
did not breach=20
the agreement. We overrule Yeh=E2=80=99s first issue.
<=
/SPAN>Viewing=20
the evidence in a neutral light, we cannot conclude that the =
jury=E2=80=99s=20
finding that NAH did not breach the billing and collection =
services=20
agreement was clearly wrong and manifestly unjust. We hold that =
the=20
evidence was factually sufficient to support the jury=E2=80=99s =
finding that NAH=20
did not breach the agreement. We overrule Yeh=E2=80=99s second =
issue. We also=20
overrule Yeh=E2=80=99s third issue, which is contingent on a =
favorable ruling on=20
issues one or two.
Award =
of=20
Attorney=E2=80=99s Fees
<=
/SPAN>In=20
his fourth issue, Yeh contends that the trial court erred in =
awarding=20
attorney=E2=80=99s fees to NAH of $458,851 in its final =
judgment.
Specifically, he asserts that NAH =
is not=20
entitled to legal fees because Yeh stipulated that he owed NAH for =
overhead expenses, NAH was not the =E2=80=9Cprevailing =
party=E2=80=9D in the lawsuit and=20
that NAH cannot recover attorney=E2=80=99s fees for merely =
successfully defending=20
against his breach claim.
Whether a party is entitled to =
attorney=E2=80=99s=20
fees is a question of law that we review de novo. Holland v. =
Wal-Mart=20
Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999). As a general rule, =
each=20
party bears the cost of its own attorney, absent a contractual or=20
statutory provision to the contrary. Panizo v. Young =
Men=E2=80=99s Christian=20
Ass=E2=80=99n of the Greater Houston Area, 938 S.W.2d 163, 168 =
(Tex.=20
App.=E2=80=94Houston [1st Dist.] 1996, no writ). Section 38.001(8) =
of the Civil=20
Practice and Remedies Code provides that a party may recover =
reasonable=20
attorney=E2=80=99s fees if its claim is for =E2=80=9Can oral or =
written contract.=E2=80=9D Tex. Civ. Prac. & Rem. Code =
Ann. =C2=A7 38.001(8) (Vernon 2003). =E2=80=9CTo =
recover attorney=E2=80=99s fees=20
under Section 38.001, a party must (1) prevail on a cause of =
action=20
for which attorney=E2=80=99s fees are recoverable and =
(2) recover damages.=E2=80=9D=20
Green Int=E2=80=99l, Inc. v. Solis, 951 S.W.2d 384, 390 =
(Tex. 1997);=20
Ryan v. Abdel-Salam, 39 S.W.3d 332, 337 (Tex. =
App.=E2=80=94Houston [1st=20
Dist.] 2001, pet. denied). If both parties receive some judgment, =
the=20
prevailing party is =E2=80=9Cthe party vindicated by the judgment =
rendered.=E2=80=9D=20
See Brown v. Fullenweider, 135 S.W.3d 340, 347 (Tex. =
App.=E2=80=94Texarkana=20
2004, pet. denied). Section 38.001 does not allow for an award of=20
attorney=E2=80=99s fees for a party=E2=80=99s successful defense =
against a breach of=20
contract claim. Cytogenix, Inc. v. Waldroff, 213 S.W.3d =
479, 490=E2=80=9391=20
(Tex. App.=E2=80=94Houston [1st Dist.] 2006, no pet.). However, =
fees incurred in=20
defending a breach of contract counterclaim can be recovered to =
the extent=20
they are necessary to a party=E2=80=99s recovery on its original =
breach of=20
contract claim. Varner v. Cardenas, 218 S.W.3d 68, 69 (Tex. =
2007).
<=
/SPAN>While=20
Yeh is correct that NAH may not recover attorney=E2=80=99s fees =
solely for=20
successfully defending a contract claim against it, NAH also sued =
for=20
breach of contract and was successful in its suit. NAH sought to =
collect=20
the amount due in overhead expenses without litigation by sending =
a demand=20
letter to Yeh=E2=80=99s attorney. In its demand letter, NAH =
acknowledged the=20
amount owed to Yeh for misdirected deposits. NAH never disputed =
that it=20
owed Yeh an offset for the amount of the misdirected deposits. =
When Yeh=20
did not pay the amount due for the overhead expenses, which was an =
amount=20
that exceeded the amount NAH owed Yeh for the misdirected =
deposits, NAH=20
brought a breach of contract suit to recover the outstanding =
overhead=20
expenses. Yeh filed a counterclaim for breach of contract stemming =
from=20
NAH=E2=80=99s failing to follow up with insurers about payment, =
failing to collect=20
co-pays from patients, and committing other billing errors. The =
jury found=20
that Yeh owed NAH $113,627.51 for overhead expenses incurred =
during the=20
shared expense period. The jury also found that Yeh was entitled =
to an=20
offset of $53,615.78 for NAH=E2=80=99s misdirected deposits. The =
jury found=20
against Yeh on his counterclaim, finding no breach by NAH. In the =
trial=20
court=E2=80=99s final judgment, it rendered judgment in favor of =
NAH for the net=20
amount of $60,011.73.
<=
/SPAN>Because=20
NAH was successful on its breach of contract claim and was awarded =
damages, NAH was entitled to recover attorney=E2=80=99s fees under =
section 38.001.=20
Tex. Civ. Prac. & =
Rem. Code=20
Ann. =C2=A7 38.001(8); Green Int=E2=80=99l, =
Inc., 951 S.W.2d at 390.=20
Although the award to NAH was reduced by the amount NAH owed to =
Yeh, we=20
cannot conclude that this offset means that NAH was not the =
prevailing=20
party at trial. NAH never disputed that it owed the amount from =
the=20
misdirected deposits, and acknowledged that debt in the demand =
letter sent=20
to Yeh prior to the beginning of litigation. The judgment for the =
overhead=20
amount exceeds the amount NAH owed to Yeh for the misdirected =
deposits.=20
Further, NAH can recover attorney=E2=80=99s fees for its defense =
against Yeh=E2=80=99s=20
counterclaim because NAH could not have prevailed but for the =
successful=20
defense. See Varner, 218 at 69. We hold that the trial =
court did=20
not err by awarding attorney=E2=80=99s fees to NAH by determining =
that it was the=20
prevailing party =E2=80=9Cvindicated by the judgment =
rendered.=E2=80=9D Brown, 135=20
S.W.3d at 347.
Conclusion
<=
/SPAN>We=20
affirm the judgment of the trial court. All pending motions are =
denied as=20
moot.
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Elsa=20
Alcala
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Justice
Panel=20
consists of Chief Justice Radack and Justices Alcala and=20
Bland. |